Should You Buy Cheap Rental Properties?

A question I’m often asked is ‘Do you recommend buying cheap houses as rental properties, in the 30,000.00 – 70,000.00 price range?’. And my answer is, ‘Yes!

I’ll give you several reasons why buying cheap houses, where there’s demand, can be a great investment especially when your first starting out as a property investor and landlord.

There’s a common misconception that the more expensive and the more attractive a property, the more that can be charged for rent and the bigger return you will receive, and that’s simply not true. Cheap rental properties can make VERY good investments.

Now, I’ve not bought a house in the 30,000.00 – 70,000.00 price range, yet, but I plan to, and in fact, the cheapest property I have bought has been my best performing property. It’s been a good solid investment. It’s never been vacant for more than 3 weeks in a year, and that has only happened once in the 14 years that I’ve owned it, and I have also seen some nice capital growth in that time too. I remember, when I first viewed it, I wasn’t that keen. But after listening to the letting agent about the demand in the area, I decided to go for it and I’m so glad I did.

By owning a cheap single unit property you will gain experience as a property investor and landlord. Also, depending on your approach, you may also decide to look for one that requires some cosmetic work to bring it up to scratch so you add value before your first tenant moves in, and you gain some experience with renovations too.

Some people say that they are not going to make a significant income with a cheap rental property, and although that may be true when you compare a single unit family home to a large House of Multiple Occupation, you have to consider that smaller single family properties will require less capital to get started, less time to get up and running, and less time to be managed once a tenant is in situ. They’re typically less of a headache.

I would also add that your rental yield is likely to be better, compared to buying properties in city centres or in more expensive regions. I have a video on working out the rental yield and ROI here which you should watch if you are not familiar with these terms. Property investing is a long term business and business’ are all about cashflow.

If your goal is to replace your salary from your current job in the future, then buying several cheap properties will help you reach that goal providing you stay focused on the rental yield and cashflow, and not the potential capital growth. Each property you buy will be a stepping stone to the next one and your experiences of being both a landlord and investor will sky rocket. It makes sense right, the more you purchase and hold, the more experiences you will gain.

Recent research conducted by UPad has shown that 2 bedroom properties for both houses and apartments, bring in the best rental yield, and I know from experience that these types of properties are rented by key workers such as, teachers, nurses, taxi drivers; both white and blue collar workers, who don’t necessarily want to buy their own property, but want a nice place that they can call their home.

6 Reason’s Why Cheap Rental Properties Are Great For First Time Property Investors And Landlords

Ok, so if you’re a first time investor, cheap properties can really work for you for a number of reasons:

1. Firstly, lending will be easier. If your looking to borrow 40,000.00 as opposed to 200,000.00 because when you start out there will be fewer lenders available to you. Once you have some experience with owning a rental property and operating as a landlord, you will find that there will be more lenders that will be willing to do business with you.

2. There’s a better chance that you will be able to reduce your loan to value to increase your cash flow. If you have 30,000.00 to invest for example and you use that as a deposit on a 120,000.00 property you will need a mortgage with a 75% LTV, and you will find that the interest you pay on your mortgage will be higher than if you used your 30,000.00 to purchase a 60,000.00 property and took out a mortgage with a 50% LTV.

3. Less capital will be required, but yet you will still gain the experience of purchasing an investment, working with a mortgage broker and a solicitor, and operating as landlord as if you had bought a more expensive property in a city centre or a different region. If you have a sizeable amount of money to invest, but you’re not 100% sure if property is the right asset class for you, then a cheap rental property will allow you to dip your toe in the water, before you decide to go all in!

4. Running costs will be cheaper. I’m talking about buildings insurance as well as mortgage repayments AND utility bills if you find yourself letting the property with bills included.

5. Cheaper properties won’t cost as much to fix compared to more expensive ones. You will gain experience of solving and fixing problems and any mistakes you make wont be as costly compared to the bigger more expensive properties.

6. There’s also a good chance that a cheaper rental will not be near where you live, which will force you to look for a good managing agent and then allow you to put it at the back of your mind once it’s up and running, so you can focus on your normal routine and enjoy the passive income that it brings. Experience of working with letting agents is good to have in my opinion.

I think that cheap rental properties are a great way to start as a landlord and shouldn’t be overlooked. Start as soon as possible, buy cheap, gain experience and start to build your empire and your legacy whilst providing a good service to your customers.

Over to you – Have you bought cheap properties, or are you thinking of buying a cheap property as your first investment? Let me know in the comment section below and I would also be happy to answer any questions you may have.

All the best!
 
Andy

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Property Investing And Being A Landlord Is A Business

Are Landlords Running A Business, or Are They Just Investors?

Being an investor and landlord is a business.  Some people would argue that landlords are only investors, so in the video below, I want to explain the reasons why buy to let properties are a business and to also talk about why a lot of people are so interested in starting their own business’:

To be honest, I didn’t think about my properties as a business at first, and it wasn’t until I started to talk to and listen to more experienced investors, that I then started to change my approach to the whole thing.

There are 2 reasons I often hear as to why people would say that being a landlord is not a business

1.  Owning a buy to let is simply just investing, and the rent received is a return on that investment, similar to stocks and shares.  Although that maybe true, you have to remember that landlords have a customer who needs must be met and who’s problems ‘with the property’, must be addressed.

2.  The governments introduction of Section 24 would suggest that the government doesn’t classify private landlords as a business, as business’s are usually entitled to offset 100% of their borrowing costs against their turnover for the calculation of tax.

Ok, fair comment, but lets look at this more closely because individuals who invest through a company, are not liable to Section 24.  So 2 investors buy houses as an investment next door to each other.  One investor buys the property in their own name, and the other investor buys through a Limited company.  Does that mean that one is running a business and the other isn’t?  Of course not.  This is simply the difference between owning a company and trading in your own name.  A piece of paper can determine if it’s a Company, but not necessarily whether it’s a business or not.

Let’s look at the definition of a business: 

Source dictionary.com – Point 3. a person, partnership, or corporation engaged in commerce, manufacturing, or a service; profit-seeking enterprise or concern.

Also, the HMRC website states that Profits from UK land or property are treated, for tax purposes, as arising from a business.

I believe that when you start to approach property investing as a business, and not just as an investment, you will do better and there is a greater chance of your portfolio improving and growing over time.

Here are some top reasons why people want to start their own business, and all of these apply to being a landlord and investor

1.  You start to take control of your own destiny.  You get to make decisions and direct something in the way you think is best.  Not every decision will be right, but we can only learn and improve by our mistakes.  If you don’t make any mistakes, you’ll never change or improve.  But the point I want to make here, is that you will start to control your own destiny.

2.  You become an entrepreneur.  And I believe, we all have an entrepreneurial streak within us.  The text book definition is someone who organises a business and assumes the risk for it.  On the flip side of that, you reap all the rewards, not your employer!  As you know, there is some risk with property investing, BUT, with a small amount of the right knowledge, you can reduce that risk significantly.  Some people enjoy the routine of a job and performing the same tasks day after day, as an entrepreneur, you learn and create new opportunities for yourself.

3.  You can start to plan your own work life balance.  It’s a step in the right direction to not being solely dependant on an employer.  As your business grows, you can set your own hours and work from wherever you want and wear what ever you want.

4.  You choose the people you work with.  Now initially it will probably just be the people you hire to provide a service, like a letting agent.  But unlike being an employee, if you don’t like your co-workers, it’s easy to replace them.

5.  You can give back to your community.  Many entrepreneurs like the idea of being able to give back, whether it’s in the form of a product, a service they offer, creating jobs or donating to charities.  Plus there’s a lot of satisfaction in solving a problem for someone, and providing someone with a nice home, is a good problem to solve.

6.  You Feel Pride In Building Something of Your Own.  There is nothing like being successful through your own abilities, ideas and efforts.

So to finish, I recommend that if your new to property investing, you should approach it as a business from day one, if your already landlord, start thinking like a business owner now, if you’re not already.

Are you a landlord?  Do you agree with my comments or do you have anything to add?  Please leave a comment below as I would appreciate your thoughts on this.

Cheers

Andy

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Affordable and Effective Upgrades for Rental Properties

Rental properties are worth more money and can bring in more income if they’re in good condition. Although remodeling can be expensive, there are a variety of affordable upgrades that property owners can make to increase their monthly rental income. These five projects can help you make your rental property more impressive for potential tenants.

Refinishing Kitchen Cabinets

Damaged, scratched or stained cabinets can affect the entire look and feel of the kitchen. Replacing cabinets can cost as much as several thousands, depending on the type, size and quantity of cabinets. Luckily, cabinets can be refinished for a much lower price.

To refinish a set of kitchen cabinets, start by removing the doors and drawers, hinges and knobs. Clean the inside, then lightly sand down the old finish to the doors and draws to create a rough surface. Fill nail holes and scratches with wood filler, then sand them down again once the filler has dried. Clean the surface of the cabinets one more time, then apply stain or paint. Apply multiple coats as needed.  You may also want to consider replacing the doors and draws if they are built from a different material.  Simply changing the handles and/or knobs can create a fresh new look as well.

Repaint the Interior

There’s a reason why paint is a no-brainer for sellers, and landlords should always keep this in mind. It’s relatively cheap, and adds a lot of appeal to a property instantly if done correctly. Depending on the colour you choose, repainting the walls can make a room look cleaner, brighter and more spacious. When selecting a colour, paint sample squares on the walls and wait for the paint to dry fully before making a final decision. Neutral coloured paints have wide appeal and are easy to match to a range of furniture styles and colours, so neutral colour palettes are preferred by many renters. Avoid hard to clean flat finish paints. Satin and eggshell finishes are relatively easy to clean, which makes them more appropriate for a rental property.

Replace Fixtures

Replacing plumbing and electrical fixtures in the home is an inexpensive way to make a dated property look more modern. Avoid purchasing bottom of the line fixtures, as they are more likely to break quickly and will need to be replaced soon. When shopping for plumbing fixtures, look for low-flow models that save water thus money on utilities. Regardless of whether or not tenants are paying the water bill, low-flow fixtures can impress tenants because they’re eco-friendly.

If replacing plumbing and electrical fixtures, don’t forget to purchase the proper tools. A basin wrench might be necessary when replacing a tap, while a voltage tester is useful when working with electricity.

Carpet Removal

Carpeting can be difficult to maintain in a rental property. In homes where carpeting covers hardwood floors, removing the carpeting can save money while improving the appearance of the home. To remove carpeting, pull it up starting at the corner of the room and tear it into small, manageable strips. Tear out the padding underneath, then use a pry bar to gently pull up the carpet grippers. Remove any remaining nails or staples with needle-nose pliers. If the hardwood underneath doesn’t require any refinishing, this project can be completed in a few days time for little cost.

Repair Damaged Walls

Damaged drywall is easy to repair with a patch. Purchase a drywall patch from a local hardware store or home improvement centre. Install the patch over the hole, then cover the patch with drywall plaster. Sand down the plaster until it is flush with the wall. Once the patch has dried and been sanded, paint over the damaged area until it matches the rest of the wall.

These relatively easy, low-cost upgrades can improve the overall appearance of your rental property while also making your rental property more desirable to tenants. If you’re thinking about performing these upgrades on your own without help from a contractor, give yourself extra time. DIY projects often take longer than projects completed by contractors. Taking your time will help ensure that you’re able to make the improvements properly.

Written by: Ryan Tollefsen at www.akhomeshow.com.

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Renovation & Conversion of a 3 Bedroom House to an HMO – Part 2 | Property Investing

I would like to say a big THANK YOU to Ash Zuberi for inviting me back to the property now that it’s finished, AND for taking the time to answer the questions which were left in the comment section of the previous video.

I always enjoy spending time with professional investors and landlords who are raising the standards within the private rented sector, and I appreciate Ash taking the time to share his knowledge and experiences for the rest of us.

Keep up the good work Ash, and I hope to see you again soon.

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Questions asked and timeline:
 
5:21 What is an HMO?
 
10:52 Purchase price, build costs and rents likely to achieve?
 
15:42 Timescales for start to finish on an average project?
 
19:39 Was planning permission or a licence required to let the loft?
 
Join the HMO Group on Facebook
https://www.facebook.com/groups/housesofmultipleoccupancy/
 
Take a look at Ash Zuberi’s website:
www.easylivingproperty.com
 
If you have any additional questions for Ash, please leave them in the comment section below and he will be sure to reply.
 
Best wishes,
 
Andy

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Renovation & Conversion of a 3 Bedroom House to an HMO – Part 1 | Property Investing

We visit Ash Zuberi’s current renovation and conversion project of a 3 bedroom house in Swindon with www.easylivingproperty.com.

This is a project that Ash is managing for one of his clients, and it will be a 6 bedroom House of Multiple Occupation (HMO) when it’s complete.

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If you have an interest in HMO’s, as a beginner or someone with experience, I would recommend joining the HMO Group on Facebook. I have been a member for a number of years, it’s a great community and I have always received sound advice from other investors whenever I have posted a question.
 
UPDATE 24th November 2017: Works to the property are now complete and you can watch Part 2 here.
 
Thank you for taking the time to read this post. I appreciate you!
 
Best wishes,
 
Andy

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Real Estate Investing With No Money | Interview with Tom from FlipAnythingUSA

Is it really possible to invest in real estate with no money? In this video I interview Tom from FlipAnythingUSA and he has over 30 years experience with investing in both residential and commercial property.

And yes, he has experience with buying houses and commercial buildings with no money.

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Questions I ask Tom:

Why have you decide to share your knowledge of real estate investing with no money now, after all these years?

How does someone start out in property investing if they don’t have any funding or money?

What direction do you see your YouTube Channel going in, in the future?

Tom’s recommended video:
How to invest in real estate: No Money, No Problem! Don’t listen to nay sayers. It’s the Deal!

Subscribe to Tom’s channel FlipAnythingUSA

If you have any questions for Tom, please leave them in the comments section below and he will be sure to reply.

Cheers
 
Andy

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